ECB confirms July rate hike as inflation forecast jumps to 6.8%

by | Jun 9, 2022

 Hinesh Patel, portfolio manager at Quilter Investors:

“The ECB has previously been well behind the curve when it comes to tightening policy, and to some extent it is holding fast still – though this finally looks to be coming to an end.

 “Having previously provided little commitment to an end date, the ECB has now declared it intends to end asset purchases by July 1. Additionally, while no changes will be made to key interest rates this month, the ECB announced today that it intends to raise them by 25 basis points in July, with a further rise expected in September.

 “Given the sharp rise in its inflation forecasts – which is now expected to reach 6.8% this year, up from the previous 5.1% estimate – as well as lower economic growth projections for the coming years, it is unsurprising the ECB has finally had to act.

 “For now, the balancing act faced by the ECB continues to be a tricky one. The bloc is faced with inflationary shock that requires quick and decisive action, yet Russia’s ongoing attack on Ukraine continues to cast a shadow of uncertainty over Europe that could end with weak demand and recession.”

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